$BABA bulls continue to profit

Option traders have again scored large profits today on two upside positions in Alibaba (BABA).

Market Rebellion’s Unusual Option Activity Service flagged bullish option activity in the name on two consecutive sessions earlier this year:

–On Sep. 30, 11,750 December $165 calls were purchased as part of a bullish roll for $11.35 to $11.82 above open interest of 274 contracts with shares at $167.10.
–On Oct. 2, 11,500 December $180 calls were bought for $4.90 to $4.95, also as part of a bullish roll, above open interest of 4,582 contracts with shares at $165.10.

Those December $165 calls are marked for $45.75 this morning, about 4 times their original prices and the December $180 calls have traded for as much as $31.10, or 6 times their purchase prices. The stock rose as much as 27.8% in that same time period, a significant move but nowhere near that of its options.

Those calls have traded for as much as $4.00 so this morning, about 3 times their average purchase price. The stock rose 4.37% in the same time period, underscoring how options can far outperform moves in their underlying shares on a relative basis.

They are the fourth and fifth winning trades in the name to be posted on Market Rebellion this month, starting on Dec. 3.

Long calls lock in the price where a stock can be purchased, gaining with a rally and providing leverage to the underlying shares. The contracts can quickly lose value if the stock stalls or pulls back but also carry less risk than owning the shares themselves.

BABA is currently trading for $210.98, up by 0.47% after the Chinese e-commerce giant made a new 52-Week high earlier this session of $211.58.